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Mortgage Approval 101

 
Mortgage Approval 101

Posted: January 14 2021

Mortgage Approval 101

Where do we start? We hear this term “approval” all the time in the world of home buying, but what does it really mean? How do you prepare & begin the mortgage pre-qualification & pre-approval process?


What’s the difference between a pre-qualification & pre-approval?

Pre-qualification: This process is how you get an idea of what you could possibly be approved for. It’s an early evaluation of your current financial status that can typically be done over the phone, or online! Getting your pre-qualification does not require a credit check, it’s simply a quick glance at your finances to find your ‘ballpark’ affordability.

Pre-approval: Based on your mortgage pre-qualification, you can choose to go forward with obtaining your pre-approval! This step is more serious than a mortgage pre-qualification, and requires the verification of your income, debt, credit score and financial history. This pre-approval amount determines your budget when you’re shopping for your new home.

Who do I talk to about getting my pre-qualification or approval?

Our Landmark Home sales specialists assist with this question every day. In order to get pre-approved, you need to consult with a mortgage lender or broker. A lender is just another term for financial institution, or bank. We have a preferred list of mortgage specialists we work with on a daily basis. When you use a Landmark Homes lender from the list, we pay for your legal fees!

What do I need to get my pre-qualification?

All you need to get your pre-qualification is an honest idea of where your finances are today. It’s important to understand your credit score, current loans or debt you may carry & the monthly bills you pay regularly. The more accurate you are, the more accurate your pre-qualification will be! This will help you determine whether you want to go ahead with your pre-approval or wait to improve your finances instead!

What do I need to get my pre-approval?

The lender you’ve chosen to work with will request different documents depending on your financial situation. These requirements vary based on your pay structure, employment situation etc. Typically, you need the following documents to get your pre-approval:

  • Income documents, such as your most recent pay stubs
  • T4
  • Job or employment letter
  • 3 month bank statement

If you’re self-employed, you typically need the following documents:

  • T1
  • 2 years company financial statements
  • CRA Notice of Assessments


When is the right time to get pre-approved?

That’s up to you! However, when interest rates are low–it’s always beneficial in the long run to take advantage of lower interest rates, this rate effects both short- and long-term payments. When you get a pre-approval, it’s important to improve or maintain your current financial status. Since your pre-approval is not a final approval, should your financial situation change between the pre-approval and final mortgage approval you may not qualify for the same mortgage amount! Talk to your mortgage specialist before making any big purchases or financial decisions during your approval.

How long does the pre-approval process take?

As soon as you provide your mortgage specialist with all the documents they requested & everything looks good, you can get pre-approved as quick as 24 hours!

How do I prepare financially to get pre-approved?

The major items lenders look at to determine your mortgage pre-qualification & approval include your income, credit card or loan debt, monthly bills, credit score & your savings and/or down payment! If you’re able to pay your bills on time, and still have money left over–that’s a good indication you are financially prepared!

What if I couldn’t get my pre-approval?

If you already have a lot hold with us, and you’re having trouble getting your pre-approval, it’s no sweat! We can refund your lot hold cheque and recommend one of our trusted lenders to work with you to achieve your desired mortgage approval! If you’re having trouble with your down payment, we have flexible down payment options, ask our sales specialists for more details!